From: Mark.Miller102@comcast.net [mailto:Mark.Miller102@comcast.net] 

Sent: Monday, July 20, 2015 10:03 PM

To: EBSA, E-ORI - EBSA

Subject: RIN 1210-AB32

To whom it may concern,

I'm writing today in opposition to the DOL’s proposed uniform fiduciary 

standard. I believe there needs to be an exemption for fixed life insurance 

products, especially fixed annuities. An easy way to understand the harm this 

rule will bring to consumers is illustrated in the real world example I cite 

below. This example compares the efficient, well regulated sales process 

currently in effect to the convoluted process that will result from the proposed 

DOL rule, a rule that will make it much more difficult for middle-class 

Americans to obtain advice in purchasing a product that should be a critical 

part of their retirement plan.

Current Sales Process: A 70 year-old female potential customer is referred to 

one of our insurance agents to discuss the merits of a fixed annuity. She has 

$50,000 and does not want any risk. After completing a thorough suitability 

review, our agent determines that a fixed annuity paying 3.50% is best for 

her. She purchases the annuity and is happy because her money is safe, she 

has adequate liquidity and she is earning three times what she would have 

earned in a bank CD. She refers several clients to our agent in the future. Total 

commissions paid to the agent and the Independent Marketing Organization 

distributing the product equal 4.0%, but this does not come from the customer; 

her account opens with $50,000 on day one and the commissions are factored 

in to the equation when the insurance company determines the 3.50% rate.

Result – she earns 3.50%.

Sales Process after the DOL Rule is implemented: The same potential 

customer does not become a client because she objects to several components 

of the fiduciary sales transaction. She does not want to pay a $2000 – $3000 

planning fee, the amount typically charged by most fee-only planners. She does 

not want a complete financial plan, but rather simply wants to find a safe home 

for this $50,000. She also does not want to pay an ongoing 1.0% – 3.0% fee to 

put this $50,000 "under management". If she does become a client and buys 

the annuity and the upfront planning fee is waived she pays, at a minimum, 

1% per year for the rest of her life. After four short years she is stuck paying 

higher fees for life (remember the total commissions paid under the current 

model total 4.0% for the life of the contract). These higher fees hurt the client. 

Result – she buys the annuity but earns 1% less each year for the life of 

the contract or she decides to stay at the bank and earns 1% instead of 

3.50%.
Under the proposed commission disclosure she may get "cold feet" when she 

sees the $2,000 price tag and decide to delay the purchase, and might remain 

at the bank earning 1% or less for a long period of time. While commission 

disclosures seem like a great idea, they can work against the client if the client 

(incorrectly) deems them to be "too high". At first glance $2000 may seem like 

"too much commission", but the reality is this is a reasonable amount of 

compensation given the unique skill set required to be a successful agent; to be 

successful in agent must be likable, trustworthy, knowledgeable and extremely 

hard-working. This rare combination of skills warrants the $2000 commission, 

perhaps even more.

Other Concerns with the proposed rule:

Increased Liability for the agent and the insurance company. Experienced 

agents may retire early, deciding that an additional layer of regulation, cost and 

liability on top of the existing framework might tip the scale in favor of early 

retirement. Insurance companies manufacturing the fixed annuity products 

may decide there's too much tail risk from class-action lawsuits and may exit 

the market entirely. It is already difficult for them to make profits in this low 

interest rate environment which has persisted for quite some time. Numerous 

carriers have left the market due to low profitability. This rule will make more 

carriers consider dropping out of the market. How can an agent working for a 

career company (Northwestern Mutual, Mass Mutual, New York Life etc) 

possibly act as a fiduciary and claim to offer products from all sources when in 

reality they sell primarily product from their primary company? Result – fewer 

agents and fewer insurance companies offering product.

Increased Reporting Costs: Even the large RIA’s think the rule will be too 

costly to implement.

Dodd-Frank has mandated the SEC address this issue.

Treating upfront commissions as a “bad” thing is not accurate: In addition 

to harming the client directly with higher fees, forcing trail commissions on the 

existing, mostly upfront commission-based distribution channel will make it 

very difficult for new insurance agents to survive. A very small percentage of 

agents entering the field will succeed and make it a career under the current 

system – the percentage of agents who survive is approximately 5%. If upfront 

commissions are discouraged new agents will have a difficult time generating 

the revenue needed in the early years of their careers. A quick review of a 

mutual fund prospectus shows that A shares (commissions paid by the client 

upfront) are cheaper in the long run than C shares or B shares.

Finally, this proposed rule completely ignores the fact that commissions 

are already as low as they can possibly be. Insurance companies 

automatically pay the lowest possible commission on each transaction in order 

to maximize profits; If they could attract premium dollars for zero commission 

they would do so – it would be the ideal situation. The free market 

automatically ensures that commissions will be no higher than necessary to 
attract the desired premium. What makes a regulator think they are better 

suited to determine a "reasonable" commission than a marketplace which 

judges millions upon millions of transactions, one at a time, constantly making 

sure the commission is just enough to get the premium in the door?

I sincerely hope the DOL reconsiders implementation of this harmful rule. 

Advisors will not be able to afford meeting with clients who have less than 

$250,000. In the United Kingdom, a country specifically listed in the proposed 

rule as a "success story", the major insurance company Aviva now has an 

$800,000 minimum requirement to meet and advisor face-to-face. This rule will 

harm the middle class and an entire distribution system comprised of good 

intention, hard-working Americans.

Sincerely,

Mark D. Miller

Miller Associates 

Carnegie, Pa